Tuesday, October 14, 2008

Floating liquefied natural gas FLNG facilities are coming of age. In June, Flex LNG, based in the Virgin Islands, announced an agreement with Japan’s Mitsubishi Corp. and Nigeria’s Peak Petroleum to develop and market the world’s first floating liquefaction project offshore Nigeria. A few days later, Flex LNG announced another agreement with Britain’s Rift Oil for an FLNG project offshore Papua New Guinea.

The concept of FLNG has been around since the 1980s, with technology research mainly promoted by Shell and Mobil for projects with largescale capacities that is, some 3 million tons per year. Despite a number of attempts, over the past two decades the majors have been unsuccessful in getting this technology off the drawing board. Over the past two years momentum has moved towards smaller technology companies partnering with marine engineering companies for ship design and fabrication, who then partner with independent upstream companies holding stranded gas reserves.

In addition to the Flex LNG projects each of which have a 1.7 Mt per year capacity, other groups are announcing progress with their own technologies. Last September, Hoegh LNG, Aker, and ABB Lummus announced an FLNG ship with a 1.6 Mt per year capacity. That same month, SBM and Linde said they were developing an FLNG ship with a 2.5 Mt per year capacity. In May, Teekay, Mustang, and Samsung announced that the American Bureau of Shipping would class their FLNG ship, to be used in the gasrich West Africa region. Each group has its own proprietary technologies geared to a project scale generally too small to interest the majors. They are instead targeting small stranded gas fields.

Undaunted by this smallscale competition, in July Shell issued a tender offer for contractors to build its own FLNG design. Weighing 3.5 million tons with a deck area of 450 meters by 75 meters, it will deploy Shell’s proprietary new but tried and tested liquefaction process the Shell Automated CoolDown. Shell continues to focus on largescale potential deployments with its FLNG technology, and its current target project is thought to be its Prelude gas discovery in Australia’s North West Shelf Browse Basin.

Floating Lighter

An innovative solution that liquefies natural gas, but not LNG as we know it, is SeaOne’s LNG LiteTM concept utilizing Compressed Gas Liquids™ CGL™ technology. [For more on SeaOne and compressed natural gas, see ET, October 2007.] In the CGL process, a hydrocarbon solvent is added to the natural gas stream after it is cleaned of impurities, causing the gas to liquefy when subjected to 40° C and 1,400 psi. This first phase of the LNG Lite system occurs on a loading barge moored at an offshore wellhead. The conditioned natural gas stream is then piped aboard the CGL carrier in liquid form and stored in a bundled pipeline 42inch carbon steel containment system with a gas cargo volume of some 1.5 billion cubic feet, contained in 102 miles of coiled and bundled pipe. The CGL carrier offloads its cargo to a transmission barge, which simply expands and separates the gases.

SeaOne says its technology’s economics are favorable when applied to a gas field with 3 trillion cubic feet of reserves, delivering 3 Mt per year for 10 to 15 years using LNG Lite. For a 2,000mile supply chain employing 1.5 bcf CGL carriers about half a standardsize LNG carrier’s capacity, supported by one loading and one offloading barge, SeaOne estimates a total cost of $1.5 billion to $2 billion $0.75 to $1.00 per Mcf. Compare this to an LNG solution of $3.5 billion to $4 billion $1.75 to $2.00 per Mcf. SeaOne also claims that LNG Lite uses less than 60 percent of the energy needed by conventional LNG. Last year, the American Bureau of Shipping awarded ApprovalInPrinciple AIP to the LNG Lite concept vessel, but projects utilizing it are yet to be announced.

It is interesting to review how Flex LNG, only formed in 2006, has managed to jump ahead of its competitors. It placed orders for vessels more than a year ago and is now announcing partnerships along two supply chains. Its LNG Producer LNGP concept is a selfpropelled floating production storage and offloading vessel that combines several existing technologies, including the following.

Four LNG Producer hulls each with 170,000 cubic meters of capacity are on order with Samsung Heavy Industries in South Korea. The orders were placed from March 2007 to April 2008 and call for deliveries from December 2010 to March 2012. Each hull includes storage tanks, power generation, offloading equipment, accommodations, shipboard turret systems, and all utilities necessary to support installation of the 1.7 Mt per year topside. Flex LNG reports each will cost some $460 million.

The topside orders for the hulls have yet to be placed, but the design cost is expected to be from $550 to $700 per ton of liquefaction capacity. The topsides will consist of a generic liquefaction module and a fieldspecific feedgas processing module.

The vessels are designed to process some 230 million cubic feet of gas per day. When compared to onshore LNG facilities, FLNG vessels have several advantages.

• modularized

• easy startup and shutdown

• single phase, single component refrigerant

• low equipment count, with a small footprint

• no hydrocarbon refrigerants thus, improved safety

These benefits are well established, but come at the price of lower efficiency than mixed refrigerant processes. The SPB containment system, out of favor for many years in conventional LNG carriers, avoids both the sloshing issues posed by membrane storage tanks and the shortage of available deck space for processing equipment posed by spherical Mosstype tanks.

Mitsubishi’s involvement as an integrated equity partner with Flex LNG in its upstream projects which reportedly include robust longterm LNG offtake terms for 1.5 Mt per year, with prices indexed to oil and gas benchmarks should facilitate the equity and debt financing required for the Nigeria project to deliver its first cargo in 2011. Gas reserves from Nigeria’s Peak Oil project are expected to provide the required feed gas for some 15 years.